Money & Markets: Some ‘calm’ returns despite ongoing worries

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Global equity markets are recovering somewhat this morning, despite ongoing worries that central banks have done about all they are going to stimulate their economies, rising slightly in Europe and looking to open higher in North America after a down day for investors around the world yesterday.

Japan’s Nikkei, after “another wild ride” pared losses to close down only marginally today, while markets in China and Hong Kong remained closed for a holiday, explains BMO economist Carl Campus. European markets were also being lifted by some relatively upbeat economic reports of an increase in euro zone industrial production and subdued inflation, and a drop in UK jobless claims.

Meanwhile, there’s little in the way of North American reports to rattle markets here today.

On Tuesday, Canada’s S&P/TSX plunged 159.10 points to 12,223.57, while Wall Street’s Dow dropped 116 points to 15,122.02, the S&P500 16.68 to 1,626.13 and the Nasdaq 36.82 to 3,436.95 following what were also deep declines in markets in Europe and Asia.

This week’s sell-off in equity markets followed the Bank of Japan’s decision to merely continue but not increase its current, albeit aggressive, monetary stimulus strategy.

The absence of any further stimulus there, combined with concerns that the U.S. Fed may will soon cut back on the $85 billion a month its injecting into that economy and a court challenge to the European Central Bank’s stimulus package, also roiled bond markets, pushing yields higher, and sending currencies, especially the yen and U.S. dollar, on their own roller coaster ride.

In contrast, the Canadian dollar, after rebounding sharply late last week to more than 98 cents US, has been surprisingly stable against the U.S. dollar this week despite falling commodity prices. The currency, which edged up just 0.01 cents yesterday to 98.15 cents US, following a small gain Monday, was trading slightly higher again this morning amid mixed commodity prices.

But it’s not only investors who are worried about what will happen when central banks start reducing their economic stimulus measures, so is the World Bank. President Jim Yong Kim says the bank, which provides development aid to Third World countries, is closely monitoring the impact of those measures to assess how a pull-back will affect the flow of developmental aid money.

If the financial market turmoil, along with government pension and social security cutbacks, aren’t worry enough, baby boomers are being warned today that they also need to take into account that living longer means they will face the added financial challenge of fading health. “A large number of Canadians are not paying attention to the ‘gap’ between their healthy life expectancy and their overall life expectancy,” says RBC Wealth Management Group .